• Q : Loss on the short sale....
    Finance Basics :

    An investor sold a stock short a year ago for $50 per share. The stock's price is currently $52 per share. If the investor is unwilling to accept a loss on the short sale of more than $5 per share o

  • Q : Future value of a investment....
    Finance Basics :

    The exchange rate today is $1 US buys 8 pesos, the Mexican interest rate is 4%, and the investor expects that the future exchange rate will be $1 US buys 7.2 Pesos. Then what is the future value of

  • Q : Calculating the interest for options....
    Finance Basics :

    Your investment agent advises you that you can invest the $12,000 at 8% compounded quarterly for three years or you can invest it at 8 ¼ % compounded annually for three years. Which investmen

  • Q : Arithmetic meant and standard deviation....
    Finance Basics :

    What is the arithmetic meant and the standard deviation and the coefficient of variation of the annual rate of return for the annual rates of return of stock z for the last four years are 0.10,0.15,

  • Q : Criticism of a value weighted index....
    Finance Basics :

    A criticism of a value weighted index is that a they are subject to exchange rate fluctuations b they are not useful the otc market large companies have a disproportionate influence on the index sma

  • Q : Expected loan repayment from bank perspective....
    Finance Basics :

    The borrower who takes out the loan will make the full repayment with probability 0.85, but with probability 0.15, will only pay the bank $65. Then what is the expected loan repayment from the bank'

  • Q : What is the irr for project....
    Finance Basics :

    You will save $160,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $35,000 at the beginning of the project. Working capital will revert back to

  • Q : Present value of purchasing the option....
    Finance Basics :

    Calculate the present value of purchasing the option now and compare it with the present value of purchasing the land outright later on. Which is the better alternative and why?

  • Q : Estimating percent tax bracket....
    Finance Basics :

    The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the

  • Q : Full amount of par value at maturity....
    Finance Basics :

    Compare this to the yield to maturity you expect if the bond issuer is able to pay off the full amount of par value at maturity.

  • Q : What is the payback period....
    Finance Basics :

    Anderson, Inc. is considering a project with an initial cost of $28,000. The project will produce cash inflows of $9,000 a year for the first year and $10,000 a year for the following three years. W

  • Q : Feasibility of preferred stock....
    Finance Basics :

    Explain why Ted is correct by explaining why debt is normally a superior financing method to preferred stock. Also explain under what conditions preferred stock may be a viable option for some firms

  • Q : Estimating the corporate tax rate....
    Finance Basics :

    Scott Investors Inc. is considering the purchase of a $500.000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method.

  • Q : Abc optimal capital budget....
    Finance Basics :

    ABC expects to earn $2.5 million after tax next year and pay out $700,000 in dividends. Dividends are expected to be $1.15 a share during the coming year and are expected to grow at a constant rate

  • Q : Calculating project npv....
    Finance Basics :

    With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a ´surf lifestyle for the home´.

  • Q : Intrinsic value of the call- premium paid for the call....
    Finance Basics :

    A particular call is the option to buy stock at $25. It expires in 6 months and currently sells for $4 when the price of the stock is $26.

  • Q : Expected market price after repurchase....
    Finance Basics :

    The firm's managers expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price after repurchase. The firm's current earnings are $44 million. If management's ass

  • Q : Foundations of financial management....
    Finance Basics :

    The Robinson Corporation has $50 million of bonds outstanding which were issued at a coupon rate of 11 3/4 percent seven years ago. Interest rates have fallen to 10 3/4 percent.

  • Q : One-year forward rates of interest....
    Finance Basics :

    Calculate the one-year forward rates of interest implied by the November 1992 yield curve over the period 1993-2002.

  • Q : Estimate present value of annuity....
    Finance Basics :

    Find the present values of these ordinary annuities. Discounting occurs once a year.a. $400 per year for 10 years at 10 percent.

  • Q : Present and future values for different periods....
    Finance Basics :

    Find the following values, using the equations and then a financial calculator. Compounding/ discounting occurs annually.

  • Q : Finding the required interest rate....
    Finance Basics :

    Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement. What annual interest rate must they earn to reach their gold, assuming the

  • Q : Determining pretax cost of debt....
    Finance Basics :

    Jiminy's Cricket Farm issued a 30-year, 9 percent semiannual bond 7 years ago. The bond currently sells for 109 percent of its face value. The company's tax rate is 32 percent. What is the pretax co

  • Q : Weighted average cost of capital-jack construction....
    Finance Basics :

    Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. The bonds yield 8.5 percent. The company also has 5 million shares of common stock outstanding.

  • Q : Change the risk of the company....
    Finance Basics :

    The company is entirely financed by equity and has a 35 percent tax rate. The required return on the company's unlevered equity is 13 percent, and the new fleet will not change the risk of the compa

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